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We are in the midst of a multidistrict litigation in which the claims are even more frail than usual, the quality of the ‘inventory’ is even junkier than usual, and the pace of discovery regarding individual cases is even slower than usual. Nevertheless, the plaintiff lawyers (joined, sadly, by the court) frequently express exasperation with the defendants for not writing big, fat settlement checks so that we can get on with our lives and the plaintiff lawyers can move on to their next exercise in wealth redistribution.

Many of you have heard or lived this story before. Nevertheless, there is an amusing wrinkle. All parties in our case have been ordered to disclose the existence of any litigation funding arrangements and whether such arrangements could hamper the ability to settle. The defendants expeditiously filed statements that they were of aware no such litigation funding arrangements. But the plaintiffs have so far filed nothing. We wonder why. (Sorry. Let’s be honest: we do not wonder why; not one bit.)

This latest instance of the dog that didn’t bark got us thinking about litigation funding (which we have written about before, including here and here) and we stumbled across an interesting appellate decision that is almost two years old: Davis v. Oasis Legal Finance Operating Co., 2019 WL 4051592 (11th Cir. Aug. 28, 2019). A class of borrowers in Georgia filed suit against their lenders, claiming that the loans violated state usury laws. The loans were in relatively small amounts, typically less than $3000, and were to be repaid by any recoveries that the plaintiffs received in their personal injury lawsuits. That is, the obligations to repay were contingent upon success in the underlying lawsuits.

The defendant lenders moved to dismiss the case based on two points: (1) a forum selection provision in the loan agreements required lawsuits to be brought in Illinois; and (2) the loan agreements contained class action waivers. The plaintiffs contended that these two provisions violated Georgia public policy. The district court agreed with the plaintiffs. It then certified its decision for interlocutory review so that the Eleventh Circuit could decide the public policy issue before the case went further.

The Eleventh Circuit agreed with the district court and affirmed the decision that the forum selection and class action waiver clauses violated Georgia public policy. In doing so, the Eleventh Circuit recognized that public policy can be a tricky, even dangerous, ground for courts to rest upon in deciding cases. Or perhaps “ground” is the wrong word. It is too solid. The court cited an English case from 1824 characterizing the public policy defense as “a very unruly horse, and when once you get astride it you never know where it will carry you.”

For the past eleven years we have taught a law school class on litigation strategy. One of the things we cover is development and prioritization of themes. More than once, we have found ourselves counseling students that their proposed themes regarding public policy probably need to come after, and receive less emphasis than, more basic nuts-and-bolts themes such as the plain meaning of a contract or the language in statutes or jury instructions. We are reluctant to peg our fortunes on public policy predilections and we think most judges feel the same way. Granted, we attended the University of Chicago Law School and we teach at the University of Pennsylvania Law School — places harboring ample respect for nuts-and-bolts and a decent resistance to being flat-out nuts. From what we have heard, there might be some other places, possibly located in New Haven, where there is much more focus on public policy issues and the breeding of philosopher kings. But we digress.

In Davis, the court separately analyzed the public policy implications of the forum selection and class waiver provisions. The forum selection clause really did seem to run afoul of Georgia statutes clamping down on out of state lenders that “attempted to use forum selection clauses … to avoid the courts of the State of Georgia.” That is a pretty clear expression of public policy. How could the lender defendants get around that? One such statute referred to resolving disputes in the “county” in which the borrower resides or the loan office is located, and the defendants cleverly pointed out that Cook County, Illinois is, after all, a county. Note that we said “cleverly,” not “persuasively.” The Eleventh Circuit reasoned that, read in context, the Georgia statutes were clearly discussing courts in Georgia counties. So in answer to that old blues song that asks, “Baby, don’t you want to go/Back to that same old place/Sweet home, Chicago?” the Eleventh Circuit said, No.

The public policy analysis in Davis regarding the class action waiver was, to our eyes anyway, less compelling. It is true enough that the pertinent Georgia lending statutes set out that “a civil action may be brought on behalf of an individual borrower or on behalf of an ascertainable class of borrowers.” But, unlike with the forum selection issue, there was no expression by the Georgia legislature that bargaining away class actions was in any way problematic. That distinction did not win the day for the lenders. It was enough for both the district and appellate courts in Davis that the class action waiver would allow lenders “to eliminate a remedy than was expressly contemplated by the Georgia Legislature, and thereby undermines the purpose of the statutory scheme.” It does not take too much imagination to conceive of how this analysis might render it impossible for parties ever to bargain away something permitted by statute, and it is hardly self-evident that such a rule makes sense or sound policy.

But there it is. Public policy can be an “unruly horse.” Even so, if Georgia public policy regarding lenders is such a horse, the Davis court held that “it carries these borrowers safely to a Georgia courthouse.”